Battery equipment
The author is an analyst for Shinhan Securities. He can be reached at wonyong.sim@shinhan.com -- Ed.
2Q23 preview: Sales estimated at KRW31.8bn
Onejoon is expected to have generated sales of KRW31.8bn (+672% YoY) and operating profit of KRW2.3bn (positive swing YoY) in 2Q23. The order received in June 2022 to supply equipment to a client’s first-phase cathode plant in Pohang have been booked as sales throughout 1H23. We believe new order intake and future pipelines deserve greater attention than near-term earnings. One of the major orders newly secured in 1H23 is the KRW84.3bn order from the Ultium CAM project (joint venture between POSCO Future M and General Motors), for which shipments will begin at end-2023.
Cathode capacity expansion, client additions, high entry barriers
Expectations are building up for visible benefits from capacity expansion by cathode materials clients. Although cathode materials do not have to be locally produced in North America to be eligible for IRA credits, suppliers are aggressively pushing for capacity expansion at home and abroad to win long- term supply agreements with battery makers/OEMs and meet local demand. Its key client’s capex spend translates to an annual production volume of 76,000 tons for the second-phase cathode plant in Pohang and 60,000 tons for production facilities in Canada. Considering the capex spend hike per capacity and the portion of kilns in capex budgets, we estimate kiln orders from the second-phase Pohang plant alone should amount to KRW151bn.
Orders should continue to flow in from capex projects of battery materials suppliers. The combined production capacity of Korea’s four largest cathode materials makers is expected to reach 1.18mn tons by 2025, with each aiming to have production capacity of over 500,000 tons by 2028. Onejoon is competing against Japanese supplier Noritake and Korean supplier Hanwha Corporation/Momentum to supply equipment for use in high-nickel cathode materials production and mass production facilities. It is expected to increase its market presence on the back of demand from major clients. New order intake is forecast to reach KRW285.8bn in 2024.
We also need to focus on the company’s expansion into businesses other than cathode materials. Its German subsidiary, from which it books equity method gains, caters to demand from European and North American clients in battery materials, fuel cell, and carbon fiber sectors. The subsidiary’s proprietary pusher kiln technology was used to supply equipment to SK Materials Group 14’s silicon anode plant in Sangju. Order intake from the plant’s Line 2 is likely to be delayed to end-2023, but the order amount should exceed the initial line’s KRW74.4bn in 2021 given recent cost hikes.
2024 sales forecast at KRW223.8bn
In 2024, Onejoon is forecast to deliver sales of KRW223.8bn (+40% YoY) and operating profit of KRW30.2bn (+84% YoY). Share valuations of its clients are based on their growth potential from capex expansion (2024F PER average of 24x for domestic cathode materials producers). In light of the large share of battery materials-related sales (19% estimated for 2023), Onejoon warrants a valuation premium vs. competitors (2024F PER of 8x for Noritake). We keep our target price unchanged at KRW29,000.